Stock Analysis

What Does Arrow Electronics, Inc.'s (NYSE:ARW) Share Price Indicate?

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NYSE:ARW
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Arrow Electronics, Inc. (NYSE:ARW), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Arrow Electronics’s outlook and valuation to see if the opportunity still exists.

Our analysis indicates that ARW is potentially undervalued!

What's The Opportunity In Arrow Electronics?

Great news for investors – Arrow Electronics is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Arrow Electronics’s ratio of 4.61x is below its peer average of 16.6x, which indicates the stock is trading at a lower price compared to the Electronic industry. Although, there may be another chance to buy again in the future. This is because Arrow Electronics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Arrow Electronics?

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NYSE:ARW Earnings and Revenue Growth December 2nd 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Arrow Electronics, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although ARW is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to ARW, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on ARW for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for Arrow Electronics you should be mindful of and 3 of them are a bit unpleasant.

If you are no longer interested in Arrow Electronics, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Arrow Electronics?

Arrow Electronics, Inc. provides products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

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Rewards

  • Price-To-Earnings ratio (5.6x) is below the US market (15.3x)

  • Earnings grew by 49.1% over the past year

Risks

  • Earnings are forecast to decline by an average of 23.9% per year for the next 3 years

  • Debt is not well covered by operating cash flow

  • High level of non-cash earnings

  • Significant insider selling over the past 3 months

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